Princess rejects £3.5bn Carnival bid

P&O PRINCESS Cruises has formally rejected Carnival's £3.5bn takeover offer, but appears to have shifted the main focus of its counter attacks away from the price towards regulatory risk.

Princess chief executive Peter Ratcliffe said that his board's rejection was due to the need to ensure a rival offer was superior to its merger plan with Royal Caribbean, both in terms of value and deliverability.

There remained significant concern that a Princess-Carnival combination was less likely to be approved by European monopoly regulators due to Carnival's significant operations on the Continent. Carnival had made no attempt to offer assurances or new ideas about how it would address potential competition concerns.

Ratcliffe said: 'It is particularly disappointing that they offered nothing at all on deliverability. While the value has clearly moved in the right direction, it still falls short of what we consider to be appropriate.'

In its formal rejection of the offer, Princess said: 'Rather than focus on the issues of value and deliverability, Carnival has spent its time attacking the proposed transaction with Royal Caribbean and the motives of the P&O Princess board.'

It went on to doubt the reliability of Carnival's takeover proposals, suggesting that the US group run by Micky Arison may still be merely attempting to spoil the merger, securing its current position as the market leader.

Ratcliffe's board considered Carnival's proposed offer for five hours but came to a unanimous decision not to open talks for fear of driving away Royal Caribbean.

Technically, the door remains open for Carnival to come back with a better offer by the Princess extraordinary general meeting on Valentine's Day. Shareholders have the power to call for a postponement to the vote on the merger plan.

Carnival said in the absence of access to the Princess board it would continue lobbying shareholders directly. A spokesman dismissed the Princess statement, saying: 'It is merely the continuation of the Princess board's strategy of depriving shareholders of a competing offer.'

Royal Caribbean chairman and chief executive Richard Fain, prospective head of the merged company, welcomed the Princess decision, saying the Carnival offer was 'worse financially than the prospective returns from our merger' and unlikely to be delivered. Princess shares fell 2p to 398p as the prospect of Carnival's 500p-a-share offer coming to fruition receded.